Raines v. Safeco Insurance Co. of America
2011 U.S. App. LEXIS 5679
| 8th Cir. | 2011Background
- In 2001, Donald and Carole Raines sold their Overland Park property to Maurya Lyons; closing occurred May 31, 2001.
- At sale time, the Raineses had a homeowners policy with Safeco that was cancelled effective May 23, 2001; Safeco then issued a personal umbrella policy May 23, 2001 to May 23, 2002.
- Within three months after closing, Lyons filed a Kansas state court complaint against the Raineses alleging fraud, negligent misrepresentation, and breach of contract arising from alleged statements and concealments about defects in the property.
- The Raineses tendered defense to Safeco under both policies; Safeco denied coverage and declined to defend or indemnify.
- The Raineses pursued the underlying suit to judgment and prevailed; they then sued Safeco in Missouri federal court alleging breach of the policies for failure to defend and indemnify and seeking fees.
- The district court granted Safeco summary judgment; the Eighth Circuit reviewed de novo and held Safeco did not breach the policies because the claims did not involve property damage caused by an occurrence.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the underlying claim involve property damage covered by the policies? | Lyons sought damages for economic loss from misrepresentation, not tangible property damage. | Coverage requires property damage caused by an occurrence; the claims do not allege such damage. | No coverage for economic damages; claims do not involve property damage. |
| Is there ambiguity in 'occurrence' that could broaden the duty to defend? | Occurrence could be read to include the alleged misrepresentations as an accident. | Even if ambiguous, underlying case falls outside property damage; Bush controls. | Not raised; court adopts Bush-based reasoning that misrepresentation yields economic damages, not property damage. |
Key Cases Cited
- Bush v. Shoemaker-Beal, 987 P.2d 1103 (Kan.App.2d 1999) (negligent misrepresentation yields economic damages, not property damage)
- West v. American Tel. & Tel. Co., 311 U.S. 223 (1940) (state-law determinative data not to be disregarded unless highest court would decide otherwise)
- St. Paul Fire & Marine Ins. Co. v. Lippincott, 287 F.3d 703 (8th Cir. 2002) (addressing whether negligent misrepresentation qualifies as an occurrence under similar policies)
- Leonard v. Dorsey & Whitney LLP, 553 F.3d 609 (8th Cir. 2009) (predicting state supreme court decisions when unlawful authority absent)
- First Fin. Ins. Co. v. Bugg, 962 P.2d 515 (Kan. 1998) (insurance contract interpretation—unambiguous terms control)
- Spruill Motors, Inc. v. Universal Underwriters Ins. Co., 512 P.2d 403 (Kan. 1973) (duty to defend determined by potential liability under policy)
- Spivey v. Safeco Ins. Co., 865 P.2d 182 (Kan. 1993) (duty to defend and interpretation of property damage scope under Kansas law)